Ncera Farms Annual Report 2009/10

Agriculture, Forestry and Fisheries

12 October 2010
Chairperson: Mr M Johnson (ANC)
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Meeting Summary

The Department of Agriculture, Forestry and Fisheries presented the Annual Report for Ncera Farms to the Committee. The background to the Ncera Farms project was given, including the dates when the State purchased the farms, the area breakdown and the purpose for which the farms were purchased. Other statistics were provided in regard to the activities, the sizes of farms, the jobs created and disposal processes to land claimants. The activities performed and services offered were outlined, and it was indicated that there were currently around 35 employees, ranging from the Chief Financial Officer and administrative staff, through trainers, to workshop employees, farm employees and security personnel. The Chief Executive Officer had recently passed away. Statistics were given for dairy and beef farming, and mechanisation. In 2005 13 properties were allocated to land reform beneficiaries, and one property had been reserved for allocation to ten farm dwellers, who would be given Permission to Occupy. The financial figures indicated that in 2009/10 the total income was R3.46 million and the expenditure was R3,67 million, resulting in a nett loss, compared to the small profit that had been achieved in the previous financial year. Ncera concluded that a land capability report would assist in future, and that the Department was in discussion with the Department of Rural Development and Land Reform around the possibility of allocating additional land to ensure that Ncera became profitable. A study on economic viability of the current land would be done. The Minister had been asked to appoint Members to the Board by the end of November. Ncera Farms might be permanently transferred to lessees. A study would also be done on Ncera’s future role.

Committee Members were overwhelmingly unhappy with the Report, which they indicated contained several errors, and several shortcomings in information provided. They unanimously felt that Ncera Farms was not profitable at all, and that lack of vision, proper management, monitoring and leadership appeared to be the main reasons for its failure. Training was being undertaken without any prior assessment of whether the ventures would be successful. Committee Members also remained concerned that the problem of land invasions was not being addressed, and urged that the ownership be established to decide who should be taking responsibility. Members asked for further complete information on financial matters, including trade payables, the operating lease commitments, the amount of the grants and a breakdown of income, as well as exactly how the finances were utilised. They questioned the sustainability of the business, indicating that something was wrong with the farming if animals were not ready to be sold within a year, and that the prices at which milk was sold were unrealistic. Members also asked whether the recommendations by the Committee following its oversight visit had been taken into account. They were concerned about the lack of clear business plans, outcomes of training, and the lack of an asset register and depreciation valuing, as well as lack of an approved risk management strategy. No key controls and policies were implemented and performance information was not reliable, and 30% being put to salary and labour was unsustainable. Members asked whether the Department was making use of the opportunity to sit on the Board of Fort Cox College, and whether it had been asked to assist. They criticised the lack of internal controls by the Department. Members insisted upon a written report and highlighted that they also expected to receive a copy of the forensic report by 23 November. They further stated that although the Department could be given some time to implement a turnaround strategy, there were nonetheless some short term requirements, and that the Department must also provide written reasons and apology for the Department’s failure to attend the oversight meeting on 24 August, the plans to address farm invasions, and appointment of a leader for Ncera.  

Meeting report

Chairperson’s opening remarks
The Chairperson referred to the Committee’s recent visit to Ncera Farms, indicating that the Committee had been disturbed at what it had seen, particularly since the invasion of the farms would leave them unsafe and insecure. He asked the Department of Agriculture, Forestry and Fisheries (DAFF or the Department) to brief the Committee on the Annual Report of Ncera for 2009/10.

Ncera Farms Annual Report 2009/10; Department of Agriculture, Forestry and Fisheries briefing
Dr Emily Mogajane, Deputy Director General: Production and Resources Management, DAFF, conceded at the outset that Ncera Farms (Ncera) was running at a loss and that there were serious challenges that needed to be addressed. She felt that if the land was not utilised correctly it would be vandalised, as the Chairperson had alluded to in his opening remarks. She indicated that the Minister had also expressed concerns, which were fully justified. There had been slow progress. The unit that was managing Ncera was on a three month sabbatical and was not available to suggest how the farms could be utilised.

She indicated that one of the visions for Ncera was to promote dairy products in rural areas, and to teach people in dairy farming. The potential for such production was being investigated. The goal was to ensure that the farms became profitable and economically viable. Farmers had permission to occupy farms for a year. She noted that areas needing attention included the appointment of a caretaker/board member and to encourage different interest groups. She wondered whether a Portfolio Committee Member could work with the Department to come up with a solution to the problem.

The Chairperson indicated that he was not too sure about this last suggestion. He noted that an invitation had been extended to the Provincial Department of Agriculture in the Eastern Cape to attend the meeting, who had been involved with the oversight visit to Ncera, but it was unable to attend.

Dr Mogajane read out verbatim her presentation (see attached document) to the Committee. This covered the background to Ncera Farms, including setting out the dates on which the State had purchased the farms, the area breakdown and the purposes for which the farms were purchased. She noted that a Board OF Directors had been appointed in 1996, which consisted of five representatives from national, provincial and local government, plus one farmer representative. In 2009 Mr Andile Hawes and Mr Moshe Swart were appointed as caretakers.

She also outlined the activities that were currently being done at Ncera, and the size of the individual farms as well as the services that were being offered, which included land preparation, layout and contract ploughing, training and advice on fresh produce production and marketing, preparation of business plans and financial record keeping, repairs and maintenance to equipment and machinery, postal services and administrative advice, and animal husbandry schemes. Fresh milk was being sold to local communities, and a workshop provided repair and maintenance of community and Ncera tractors. She also indicated the numbers of jobs that had been created, and the names of the managers who were in charge of each property. Statistics were provided in respect of dairy and beef farming, and mechanisation.

In 2005, Ncera Farms were disposed of, by way of 13 properties being allocated to land reform beneficiaries. One property still remained, and was reserved for allocation to 10 farm dwellers, who would have permission to occupy the properties. The Department of Public Works was asked for permission to lease the properties.
She indicated who was occupying the farms. Ncera had employed 35 people. The former Chief Executive Officer had passed away in September 2010. There was also a Chief Financial Officer, an accounting officer, and 30 employees, including farm managers, trainers, supervisors and milkers, herdsmen and labourers, workshop assistants and security guards. The current grant amounted to R2.8 million.

Mr G Van Den Heever, Chief Financial Officer, Ncera Farms, outlined the financial situation of Ncera. He said that in 2009/10 the total income was R3.46 million and the expenditure was R3,67 million, resulting in a nett loss, compared to the small profit that had been achieved in the previous financial year.

He concluded that a land capability report would assist in future, and that the Department was in discussion with the Department of Rural Development and Land Reform around the possibility of allocating additional land to ensure that Ncera became profitable. A study on economic viability of the current land would be done. The Minister had been asked to appoint Members to the Board by the end of November. In future, it was possible that Ncera Farms would be permanently transferred to lessees. A study would also be done on the future role for the Ncera Centre and how it would impact on the community and farmers.

Discussion
Ms M Mabuza (ANC) was concerned about the fact that there was no foreword or opening statement in the report from either the Director General or the Deputy Director General of the Department. She highlighted a number of errors in the report. She queried the fact that the report made no mention of wages for dairy. She asked for an explanation on trade payables, and clarity concerning the operating lease commitments.

Mr Abram also was concerned about the numerous spelling errors in the report and felt that the report was not worth the emblem on it.

Mr S Abram (ANC) shared his impression that institutions run by the State did not perform. He commented that many who went out on their own struggled and battled to make impact. He noted that Ncera had not made a profit in years, and said that the Department needed to take a serious look at the financial implications of this endeavour. He felt that the money lost could have been better utilised and ploughed into the lives of those who needed assistance. He felt that money was being invested in a bottomless pit and queried the sustainability of the business.

Mr Abram wanted to highlight two facets. Firstly, he thought that the Service Centre was the responsibility of the State, and that it should be assisting in developing people. He felt that the functions of the Extension Services, as indicated in the report, should be more clearly defined, and clarity needed to be provided as to whether it should be a provincial or national enterprise. Secondly, he referred to the farming enterprise and stressed that if no weaners were sold within a year, then something was wrong. If the enterprise was not producing what it should, then the project should be reconsidered.

Mr Abram felt that the price at which the milk was sold was unrealistic, and should not be pursued if no profits were made. He also expressed his surprise that fodder was purchased, instead of being grown, which resulted in extra expenses. He stated that it must be established that there was a market when the decision was taken to run a dairy, and in the absence of some assessment as to what profits were being made, he could not understand why the project was allowed to continue.

Mr Abram could not understand how the problems, including the land invasions that were observed by the Department, were not addressed in the Report. He reminded Members that everyone present was fully accountable to Government for utilising the budgetary allocations in the best possible way. He asked to be provided with information regarding the total generated, in terms of income and grants, by Ncera Farms.

Ms M Pilusa-Mosoane (ANC) also expressed her concerns about the fact that the farms were running at a loss, which she felt could be attributed to the absence of monitoring and evaluation of the farms. She mentioned that other farms across the country appeared to be having the same problem. She also asked to be told how the finances had been utilised, and referred to the lack of follow-ups as a contributing factor to the problems. She asked whether the Department had considered the concerns and resolutions expressed by the Portfolio Committee as a result of its oversight visit to Ncera. This report provided no information about who was responsible for training on the farms, as well as the level of training. She accordingly thought that the report, as a whole, lacked quality.

Mr L Bosman (DA) agreed that the problems were of great concern. He too stressed the need for a clear vision and said he was still not clear as to why Ncera Farms had been operating. He felt that if there was effective skills training done, then it should at least be possible to evaluate expenditure. Nowhere in the report was there an indication of numbers of people being trained, in order to make an evaluation. With regard to activities carried out, he felt that there was no direction, and no idea of a business plan, nor of what should be achieved. Mr Bosman referred to page 8 of the report and questioned the outcome of having trained people, if this resulted in only 15 hectares of land being cultivated. He felt that this endeavour was not worthwhile at all. He strongly felt that Government should not be in the agricultural business. If a profit could not be made then the land needed to be given to people who also needed to have support and services provided to them.

Mr N Du Toit (DA) referred to the loss mentioned in the report, and said that he did not think the project was sustainable. He highlighted the negative figures, and stated that the cost of sales made the venture not profitable. He queried the benchmark in terms of earnings for employees on farms. He suggested that an asset register be considered, when referring to plant and equipment, as set out on Page 20. He gave some pointers in regard to the depreciation of machinery, and suggested that money be placed in a replacement fund for future upgrading and purchases. He noticed that a profit had been made on vegetables, but felt that the percentage of milk sales was too large for an overall profit to be made. He indicated that when salary and labour costs were over 30%, then problems would most definitely arise. He suggested that assistance from commercial and private enterprises be considered, although this would not come cheaply.

Mr L Gaehler (UDM) was also not impressed with the report, which he felt showed little improvement on that of the previous year. He reminded the Members that Fort Cox was situated near the Ncera Farms and asked whether any relationships were developed with Fort Cox, who could be of benefit to Ncera Farms. He felt that the presentation did not have much to say, and wanted to know how many local people had been assisted through the project. One of the things that could have been done was to exchange beef weaners with locals, since this project was expected to make a profit. He also wanted to know whether the DAFF had a board member at Fort Cox, saying that this would be helpful.

Ms R Nyalunga (ANC) wanted to know whether the training was accredited by the Sector Education and Training Authorities (SETA) or any other entity.

Ms N Twala (ANC) asked who was monitoring the farms. Violence was prevalent on the farms and invasions were ongoing. She felt that the report did not provide detailed information regarding activities. She too thought that actual names of people, rather than numbers only, should have been provided in the Annual Report.

Mr Abram could not understand how the independent auditors arrived at their expressed audit opinion, given the nature of the Annual Report. This Annual Report made no reference to performance targets and there was no approved risk management strategy. The reported information on targets was not reliable. No key controls and policies were implemented to facilitate performance information.

Mr Abram pointed out that the Annual Report indicated that some of the Ncera Farm activities were running at a total loss, so its mandate as a publicly funded institution was not clear. The finances should have been better utilised. The Ncera Annual Report was a poor reflection of the state of internal controls, as well as a poor reflection of the monitoring and evaluation in the Department, under which the entity resided. It was crucial for the Committee to request the Forensic Audit Report done on the entity, and for Ncera to act on the findings from this report, as well as the recommendations and conclusions made by the Portfolio Committee on its oversight visit.

The Chairperson stated that a business needed to make a profit. He thought that whatever was shown to be working should be enhanced and whatever was not working should be shut down. He was not convinced that the project could be turned around. In regard to the land invasions, he noted that the Department had been called upon for assistance, yet the South African Police Services seemed to be unable to assist, and he was therefore not sure who needed to address this major problem. He stressed that the entire project was “a mess”. The project was doing very badly, and Government must receive strong reasons to justify why it should be continuing. He added that there were no systems in place to address issues. He also felt that the report seemed to indicate that it had been rushed.

Mr Jacob Hlatshwayo, Chief Financial Officer, Department of Agriculture, Forestry and Fisheries, agreed with most of the comments made and admitted that there was much work to be done. He felt that, at face value, the Annual Report was in fact quite good, but admitted that the questions and problems posed had indicated that there were gaps. He suggested that the questions be reviewed with the Department, and that he should send written responses, as he did not want to waste the Committee’s time by giving any answers that might not be satisfactory. He agreed that there did not seem to be justification for giving grants.

Dr Mogajane admitted that lots of mistakes had been made, and monitoring did not occur as it should have. She noted that the Minister also had sought clarity on the whole matter. The Director General wanted a turnaround strategy to be put in place within three months. Public and private partnerships would be investigated. She asked that the Director General should be given an opportunity to turn matters around.  She felt that there was potential for Ncera and for the project to positively impact upon the community. She agreed that working with Fort Cox was another alternative. She suggested that the Portfolio Committee direct this process. She apologised for the current situation and all the problems at hand.

Ms Mabuza reminded members that the Department had made promises before and asked what assurance was given that matters now would change. She could not understand how Mr Hawes, who had never been seen by people in the farms’ area, could manage the farm from Pretoria. She reminded members that the investigative officials who were part of the meeting in February had not reported back to the Committee.

Mr Du Toit stated that transformation and development was meaningless without training. A project needed to be shown as potentially profitable before training was provided. Training in a failing enterprise did not make sense. He felt that a commercial enterprise should be brought into the project, to make it a public/private partnership. The basis for training should be built. He also recommended that a hostel for youths who showed potential should also be put in place, thus providing a feeder of trained people who would work for either the government or the farms. He felt that this was the way to grow and transform Africa. The strategy to turn this farm around should result in a model farm that could be duplicated in every province, to build capacity and produce within five to seven years.

Mr Gaehler commented that he was sure that the constitution of Ford Cox probably provided that at least one member of the Department should be sitting on the Board.

Mr Abram agreed with Mr Du Toit. He emphasised the need for a plan, and said that a timeframe should be set, to produce a plan that was both dense and detailed, and would provide results.  He suggested that the seven resolutions presented were outdated. He reiterated that the Department should be responding within a set time period, and should present innovative ideas with a definite way forward.

Mr Abram said that in regard to the invasions, clarity was needed about ownership, in order to establish who would have to take the relevant steps to address the problem. If the Department was the owner then it had to initiate the actions. He stressed that no amount of legislation, budget, or transformation could successfully contribute to agriculture and land ownership unless it was enforced by officials of high integrity who were competent and disciplined.

The Chairperson stated that all points were clearly made, and the resolutions by Members were also clear. He acknowledged that Ncera currently had no Chief Executive Officer, and was in need of a driver. He requested that the Department provide the Committee with a written apology for failing to attend the oversight meeting called by the Committee on 24 August, and noted that this undermined the work of the Committee. He stressed that the matter of invasions must be looked at as soon as possible. He also indicated that the constitution of Fort Cox College should enable the Department to make input. He thought it would be interesting to note whether similar institutions or farms existed in the country and how they were operating.

Dr Mogajane asked whether a separate provision could be made for the turn around strategy and other feedback. More time for the turn around strategy was needed, since the Department was getting input from other parties, including the Netherlands Embassy.

The Chairperson felt that certain issues could be dealt with on a short term basis, and a longer term could be allocated for the strategy. The short term issues that required immediate attention included the need to appoint a driver, address the invasions, come up with ideas and the written apology. He thought that the forensic investigation was taking too long, and asked for clarity as to the progress.

Mr van den Heever informed the Committee that there were more developments, and that the fence around Ncera Farms had come down. This matter was out of his hands since the Board of Directors had instructed him to stay out.

Mr Bosman informed the Committee that he had requested a copy of the forensic report several times, and had as yet not received it.

Ms Mabuza requested that the R1 million allocated toward fencing should not be used until all problems had been solved. She suggested that this money be rolled over into the next financial year.

The Chairperson questioned the whereabouts of the audit report.

Mr Hlatshwayo informed Members that the report had been done and was with the Minister.

The Chairperson requested that the reports be made available by the following week, including the Forensic Report which resulted from the oversight visit carried out by the Committee.

Ms Mabuza stressed that both short and long term matters be addressed by the Department before 23 November.

Meeting adjourned.

 

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